Home / Fed

Any Movement is Tied to the Economy

By Silvia Gabor Leave a Comment

As I mentioned in my early statement, Ben Bernanke didn’t manage to really impress the markets neither yesterday nor today. Maybe the only factor that would make a difference is the fact that yesterday the chairman of Fed made it clear that is very flexible in taking decisions while today his attitude may have shift more towards a dovish one, with the promise that even if by the end of next year the QE3 will be ended, the Fed will keep its policy highly accommodative.

The manufacturing in Philadelphia increased considerably at values last met in March 2011, possible marking the start of an upward trend for the American economy. Last month, only 334.000 individuals filled an unemployment insurance, leading the labor market to the greatest shape since May. In an attempt to approach the situation of gold, Ben Bernanke highlighted another positive aspect of the current economic situation, the fact that investors feel safer now and they don’t make safe deposits as much as in the near past. For all that, taking in consideration a more consistent period of time, the data are mixed, so it’s too soon for the Fed to take a firm position concerning the QE3.  Along with close supervision of the evolution of the economy, gradual steps will be made and changes of situations can occur.

Filed Under: Economic News Tagged With: , , ,

Why Ending QE3?

By Silvia Gabor Leave a Comment

The Federal Reserve received today encouraging signals from the U.S. economy. The Consumer Price Index indicated a rise (0.5%) in the price of goods, mainly sustained by the higher cost of gasoline, fact confirmed by the Core Consumer Prices Index that was reported in line with expectations at 0.2% (the last index excludes the energy and food’s costs). It is important to see the inflation being kept under control but on the other side, low values of the index of prices are not much help for the economy. The industrial production has taken a balanced value, particularly sustained by more confident homebuilders. Since January 2006 the house building industry started to lose its pulse and now it seems that it may regain its rhythm.

The positive outlook was maintained by the speech of one of the FOMC members today. Even if the growing rate is not as high as expected, it is stable and represents the ground for the monetary policies that are implemented. If the economy is continuing at this pace, the tapering of QE3 is expected to start later this year with an end in the first quarter of 2014. Further improvements are expected especially in the job and housing market. It is important to remember the fact that United States is seriously affect by the global negative sentiment (recently, the IMF revised down its global growth projections) and the fact that economies like China are slowing down.

Filed Under: Economic News Tagged With: , , , ,

EURUSD Was Not Yet Ready for…

By Razvan Mihai Leave a Comment

In the first week of June, Mario Draghi said that ECB will keep the interest rates at record low for an extended period of time and there are arguments for it to be cut even more. In the same week, on Friday the Non-Farm Payrolls surprised the market with a value above all forecasts. The dollar got stronger and stronger, managing to get the EURUSD quotation under 1.2800.

The story does not end here. Last week, the second week of the month, were published the FOMC Meeting Minutes and Ben Bernanke had a speech titled “A Century of US Central Banking: Goals, Frameworks, and Accountability”. Investors were disappointed to see that, in the minutes, there was no date from which Fed will start tapering the monetary easing program. The full attention was moved to Ben’s speech, but nothing was said about any dates. This time the dollar started to lose and in several hours EURUSD got back over 300 pips.

Next week Ben Bernanke will testify on the Semiannual Monetary Policy Report before the House Financial Services Committee, in Washington DC

eurusd-was-not-ready-for-a-breakout-14.07.2013

Chart: EURUSD, Daily

Looking at the price action of EURUSD we can say that it wasn’t ready to break out from the consolidation pattern, which is actually a symmetrical triangle.  The lower boundary is around 1.28 level while the upper one sits at 1.34. The main axis, as it can be seen on the chart, is 1.3200. This level seems to be the equilibrium one.

If the price breaks above 1.32 we can expect for it to test the upper line of the triangle, while if it drops or remains under the pressure rises on the lower line of the pattern.  This currency pair will remain sensible to the economic data published from the United States and will the volatility will increase during the speeches of Mario Draghi and Ben Bernanke.

Filed Under: Forex Analysis Tagged With: , , , , ,